Escala adviser exits dent Powerwrap flows for Praemium

Praemium has reported its funds under administration (FUA) has grown 12 per cent to $64.3 billion, with growth largely stemming from Spectrum inflows, while Powerwrap tumbles.

In its June quarter results, Praemium highlighted the positive movement in its “next generation” IDPS, Spectrum, which saw net inflows of $339 million that boosted its FUA to $2.4 billion.

Interim chief financial officer Simon Moore explained that the net inflows is on top of the $440 million in the March quarter.

“The $2.4 billion also includes $1.5 billion in transfers, which is coming from OneVue on the integration,” Moore told an investor webinar.

“In the next half, we’ll be focusing on onboarding Euroz Hartleys … which will help build that momentum. That said, we think it’ll probably take a couple more quarters under the belt to get a better sense of the longer-term growth trajectory and be able to calibrate that growth.”

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Praemium CEO Anthony Wamsteker added: “Spectrum has closed the product gap which we believe was preventing us from achieving the full potential of our high-quality technology offering."

Total FUA hit $64.3 billion in the quarter, up 12 per cent for the financial year. 

Separately managed accounts (SMA) under Praemium’s control increased from $11.3 billion to $12.9 billion (up 12 per cent), while Powerwrap reported growth of 6 per cent for the year with $13.4 billion FUA.

OneVue shrunk $2 billion FUA due to a 51 per cent transfer of assets to other platforms. 

Powerwrap, however, suffered net outflows of $251 million, which Moore said was “disappointing”, with over half of these coming from a single client Escala Partners. Praemium had entered into a strategic partnership through Powerwrap with Escala Partners in 2023, but Escala announced recently that it had formally become part of Focus Partners Australia.

“The frustration is that the flows do not relate to customer satisfaction or the strength of the proposition. We’ve looked carefully at the outflows,” Moore said. 

“We understand that the outflows are associated with the departed advisers and other changes at Escala, and we are hoping that with the ownership of Escala resolved, that this becomes more settled in the future. That said, we expect that Powerwrap will be impacted by the fact that our primary wrap product is now Spectrum, and we expect IDP growth to be more focused in Spectrum.”

Wamsteker added: “More than half of those outflows were from a single client, related to changes that Focus made to the ownership of the business. It was money that was probably going to have stayed until the changes.”

Apart from these outflows, he said he was confident overall outflows from Powerwrap were now “tailing off” compared to outflows of $437 million in the prior corresponding period. 

Net quarterly inflows across all platforms, excluding OneVue, came to $152 million.

According to the report, the June quarter included $708 million in positive market movement, representing approximately 2.3 per cent of the value of platform FUA. 

“Our businesswide net flows have been negatively impacted by gross outflows being relatively high over the past two financial years,” Wamsteker explained.

“In considering this trend, we note that in the absence of the outflows from transitioning advisers ($1.8 billion) and OneVue, the gross outflows are much closer to the market average for custodial platforms. As such, we expect more of our gross inflows to translate into net flows than has been the case recently.”